Another December, another opportunity to reflect on the year that was. And that's exactly what we're doing over on TeleGeography Explains the Internet.
This week, Greg Bryan kicks off the first of a two-part telecom year in review, welcoming experts Patrick Christian, Rob Schult, and Jon Hjembo to highlight the major trends they saw in their principal research areas.
Part one takes us through the year in wholesale internet, cloud services, transport pricing, data centers, and lots more. We talk inflation, we talk energy, we talk geography. And we're only just getting started.
Check back next week when another cadre of TeleGeographers tag in to tell us about what they saw in 2022.
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Key Takeaways
Transport Pricing Saw Unprecedented Stability
For the first time in 20 years of tracking, the prices for transport services, particularly 100G waves, saw stability or even instances where renewal prices were higher than previous years.
This contrasts with the historical trend of continuous price declines driven by technology improvements increasing supply. This shift in 2022 was primarily attributed to delays in equipment availability and upgrades caused by supply chain issues, which curtailed the expected increase in supply.
Additionally, high demand, partly residual from the 2020 COVID spike, meant people were willing to pay more for available capacity. While price erosion slowed significantly across major routes in 2022 compared to previous years, experts anticipate that price declines will resume in the coming years as a significant number of new submarine cable systems are commissioned and come online, increasing supply and competition.
Cloud Region Expansion Continues, Focusing on Emerging Markets
Cloud providers like AWS, Google, Azure, Oracle, and Alibaba added 17 new cloud regions in 2022. While this was a slight decrease from peak years, it still represents strong growth.
A key trend is the shift in geographical focus for this expansion. While traditional hubs in the U.S., Western Europe, and East Asia still see some activity (Europe had the most launches in 2022), there's significant growth occurring in less developed regions such as the Middle East (four launches in 2022), Africa (focused initially on South Africa), and Latin America (expanding outside of Brazil to areas like Chile, Colombia, and Mexico).
This expansion is often correlated with the development of new infrastructure like submarine cables. The build-out in these emerging markets is expected to drive future internet growth. There are still 38 cloud regions planned to launch over the next two years.
Regulation and Energy Prices Heavily Impacted Data Centers
Two major themes for data centers in 2022 were the impact of increasing regulations and the energy crisis in Europe.
Governments in key markets like Singapore, the Netherlands, Ireland, and Germany began implementing more stringent regulations focusing on data centers' impact on land and energy use. This scrutiny led to some halting or slowing of new development in core city areas and is driving some development to surrounding suburbs or less regulated regions in the short term. Regulators are pushing for greater sustainability measures. The energy crisis in Europe, tied to dependence on natural gas and geopolitical factors, is having a direct and significant impact on data center collocation pricing.
Data center operators in Europe are anticipating price increases of 20% to 40% or potentially more starting in 2023, with some increases already underway.
